The Indonesian billionaires behind

the ‘MVP Group’

82
BY RIGOBERTO D. TIGLAO ON JUNE 2, 2015OPINION ON PAGE ONE
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First of a series

The so-called “MVP” group of companies—dubbed after the initials of its public face and
chief executive Manuel V. Pangilinan—has emerged as one of the biggest conglomerates in
the country today, its newest and the most aggressive.

Yet the real ownership of this vast conglomerate has been kept hidden from the public eye.

Until now.

The conglomerate is dominantly owned and controlled by Anthoni Salim, 66, heir to the
fortune of his late father, Soedono, who was the biggest and closest crony of the late
Indonesian strongman Suharto during his 33-year regime. “MVP” has miniscule shares in
the conglomerate. That the group has strived to make it known by that name, as will be
explained in this series, is for a specific purpose.

Forbes magazine ranked Salim as the third richest Indonesian in 2014, with his $5.9 billion
net worth topping that of Philippine tycoon John Gokongwei’s $4.9 billion or Jaime Zobel de
Ayala’s $3.9 billion, according to the same list.
 Who owns what: “MVP Group”?

The Forbes’ profile of Salim in 2014 is a revelation: “Salim’s Philippine Long Distance
Telephone (PLDT) has invested $445 million [in]a 10% stake in Germany’s Rocket
Internet. His father,Liem Sioe Liong founded the Salim Group; the clan was later criticized
for ties to Suharto.” Salim’s PLDT, not MVP’s nor First Pacific’s.

(The Javanese name “Soedono Salim” which Liem, a Chinese immigrant from Fuzhou,
adopted for him and his family to blend easier into Indonesian society was suggested by
the dictator himself, with “Soedono” meaning “good-money”.)

The Forbes’ writer probably kept scratching his head in confusion. Salim is the only
billionaire in the magazine’s list who is indisputably one of Indonesia’s richest tycoons. Yet a
big chunk of his wealth is generated in another nation, the Philippines. That’s how broken
our nation has become.
From 2000 to 2014, First Pacific Co., Ltd. – Salim’s holding company – generated $2.7
billion in profits from its Philippine operations, mostly from PLDT amounting to $2.2 billion.
In comparison, Salim’s companies in his own country generated just about half of that, or
$1.4 billion. That means his Philippine operations make up 66 percent of his empire’s
profits.

Remember that Salim acquired PLDT in 1998 for $749 million, while Meralco was captured
– as these series will explain – with the Indonesian bringing very little new capital into the
country.

So much for the argument that foreign investments bring in much needed funds to a capital-
deficit country. In the case of Salim’s operations, it has resulted in capital outflow – $2.7
billion in 14 years or $200 million yearly, or nearly fourth of the average foreign equity inflow
over the same period.

And as this series will also explain, Salim’s companies have always used local borrowings
for much of its operations and acquisitions, even managing to borrow billions of pesos from
government banks such as the Development of the Philippines and the Land Bank.
Where Salim has been making money: Your cellphone and Meralco bills have made this Indonesian a
lot richer. (Background photo: Salim, behind him a portrait of his father Soedono, also from
forbes.com

Those huge revenues are possible because of Salim’s controlling 26-percent holding in
PLDT, the biggest telecom firm in the Philippines, which owns mobile-phone behemoth
Smart Telecoms as a subsidiary, and his 52-percent stake in Metro Pacific Investments
Corp (MPIC), his holding company of 48 subsidiaries in the country. MPIC’s cash cows are
the Manila Electric Co., the electricity-distribution monopoly in Metro Manila, and Manila
Water Services, the monopoly for water distribution and sewerage for the western part of
the metropolis, covering 17 cities.

It is a mockery of our Constitution, an indictment of the rule of law, and a scandalous

demonstration of how weak our state has become by the fact that we have a foreign-owned
conglomerate, masked as Filipino controlled, the “MVP Group of Companies.” It has skirted
the Constitutional restrictions on foreign ownership in public utility firms and even the media.

The ignorance of our Congress has again been demonstrated when it passed last week on
second reading a resolution calling for constitutional amendments to lift purported
“restrictions” on foreign investments.

What restrictions are they talking about? An Indonesian tycoon, with the help of clever
lawyers and a Filipino partner acting as front man, has craftily woven his way through the
loopholes in our laws and captive regulatory systems to gain control of strategic public utility
firms, and even media outfits in our country.

In the next few years, Salim’s revenues from his Philippine operations will breach the $1
billion level yearly, as his huge infrastructure and power projects start to yield virtually
monopoly profits. That’s why to Salim, it is crucial for Congress to amend our constitution
and legitimize foreign capital in restricted industries.

Through MPIC’s Metro Pacific Tollways Corp., the Indonesian is now the biggest toll and
expressway operator in the country, managing the North Luzon Expressway (NLEX), Subic
Clark Expressway and the Manila Cavite Expressway.

President Aquino’s Administration has turned over to the Salim conglomerate some of the
country’s biggest infrastructure projects.

Among these are toll road expansion projects such as the NLEX Harbor Link (P11 billion
project cost, NLEX Citi Link (P7 billion), Cavitex expansion (P8 billion), Connector
Road/Metro Expressway Link (P124 billion).

The group has diversified into bridge construction with its P18 billion project to build the
Cebu-Cordova Bridge. In partnership with the Ayala group, the Salim conglomerate has
won the P1 billion projects to operate a computerized fare collection for the light-rail lines.

In 2013, its 55-percent controlled Salim consortium won the project to build the P65-billion
Light Rail Transit Line Cavite Extension Project, the biggest infrastructure project awarded
under the Aquino Administration.

Unexpectedly thrown in as part of the project was the award of the construction of the
common station of LRT lines to the consortium, which moved its location close to the
Trinoma mall of the Ayalas – Salim’s partners who hold a 35 percent stake – from its
original SM North Mall site. Such government decision was so patently anomalous that the
SM’s Sys have sued, even bringing the case to the Supreme Court.
Salim’s latest coup was winning the Cavite-Laguna Expressway (Calax) project with its bid
of P27 billion, P5 billion more than the next highest bidder, a San Miguel Corp.-led
consortium.

PLDT itself, which Salim’s firms control, together with Japanese companies, is a corporate
empire with 49 subsidiaries, several in strategic public utilities, the largest of which are the
mobile telephone firm Smart Telecommunications and Cignal TV, the direct-to-home
satellite TV firm that has the biggest subscriber base.

Newest media mogul

Salim, in effect, has over the past several years become the newest media mogul in our
country, despite the categorical constitutional ban on foreign ownership of even a single
share in a local media outfit.

Through a PLDT unit his executives control, Salim’s group operates TV 5 with its more than
two dozens radio stations and online news edition, interaksyon.com. PLDT’s power to prop
up a media outfit with mediocre expertise in the field was, in fact, demonstrated when it
threw nearly P1 billion a year into advertising to its start-up firm TV-5 from 2010 to 2014.
According to PLDT’s latest report, that financial support will continue until 2021.

Salim indirectly holds, through PLDT’s 70 percent interest in BusinessWorld and a 22

percent stake in the Philippine Daily Inquirer. Soon – I was informed by highly reliable
sources – the New Standard newspaper will join Salim’s media stable.

The Salim conglomerate last year bought the Philippine Star publications for P3.5 billion
from the family of House Speaker Feliciano Belmonte.

Is it just a coincidence that Belmonte is the principal author of a resolution for the
Constitution to be amended to lift all restrictions on foreign investments?

That amendment would render moot and academic a Supreme Court move to implement its
2012 ruling that Salim’s control of PLDT is unconstitutional — which would result in the
Indonesian empire’s collapse like a house of cards.

Salim, of course, need not care whether the media outfits make money or not. If these
flounder, the loser will be PLDT’s Beneficial Trust Fund, which financed the setting up and
acquisition of these media enterprises.

After all, his media empire has a different purpose other than making money. Because of
his empire’s tremendous clout in media, our press and press institutions — from the
National Press Club to the Philippine Center for Investigative Journalism — have turned a
blind eye to the capture by a foreign entity of a sizeable portion of the Fourth Estate. I have
been told that both broadcast and print media dare not cross Pangilinan, because his firms
such as Meralco, PLDT, Smart account for nearly a fifth of media advertising revenues.

The Salim group has even learned to make big money out of disease and old-age maladies.
It now operates the country’s biggest hospital chain, which includes top-of-the-line hospitals
such as the Makati Medical Center near Ayala Avenue and Asian Medical Center near the
Ayala Alabang village. Its hospitals income from 2011 to 2014: P3 billion. Who would have
thought the work of alleviating humanity’s ailments could be so profitable?

Gargantuan hoax

That the Salim conglomerate is the “MVP Group” has been a gargantuan hoax. Not even
legendary American super-executives Jack Welch or Lee Iacocca, working in US
capitalism’s most advanced state in which corporations are owned by tens of thousands of
shareholders, had the gall to call their General Electric or Ford Co. as the “Welch” or
“Iacocca” group of companies.

Based on its latest report to the Securities and Exchange Commission (SEC), Mr.
Pangilinan owns only 1/10 of one percent of the conglomerate’s flagship firm PLDT.

Salim-controlled firms – details of which will be reported in these series – hold the
controlling 26 percent of PLDT, while two firms of the Japanese NTT conglomerate have 20
percent. The rest of the shares are dispersed among thousands of Filipino and foreign
investors through the Philippine and New York stock exchanges

A Salim-owned company, Metro Pacific Holdings, owns 52 percent of the capital stock of
MPIC. The rest of the shares are dispersed among 1,335 passive stockholders as stock
market investments, 34 percent of which are foreign-owned and 14 percent Filipino.

In its March 2015 filing with the SEC, Pangilinan is reported to have “nil” shares, stated only
in order to qualify him to sit on the board.

How the heck could it be the “MVP Group of Companies”?

Perhaps “Salim-Del Rosario Group” would be a more accurate name. Metro Pacific’s annual
report lists Foreign Affairs Secretary Alberto del Rosario, together with his wife Gretchen, as
its biggest individual stockholder with 11.5 million shares – though only 0.04 percent of the
total.
 Summary of ownership of “MVP” companies

Del Rosario has been a key figure in the conglomerate’s expansion into the country since
the early 1980s, and since 2003 until his appointment as foreign affairs secretary, he served
as a board director of Salim’s international holding firm itself, First Pacific Co. Ltd., as well
as of several Salim firms, including Indonesian companies.

It is certainly ironic that del Rosario has cried to the highest heavens over Chinese
occupation of the uninhabited Scarborough shoal, when he has helped Indonesians control
key industries at the heart of the metropolis.

But maybe Pangilinan’s huge shares will show up in that Hong Kong-based holding firm
First Pacific?

Not at all.

While he owns 1.4 percent equity shares in First Pacific Co., Ltd — mostly the result of his
stock options over 30 years — this isn’t really a significant shareholding, as Salim’s top
strategist Edward Tortorici has 1 percent.

It is even surprising that Pangilinan owns only so few shares, despite his 34 years as
Salim’s top executive and his crucial role as the Indonesian conglomerate’s face in the
country. “MVP” really means Salim’s “Most Valuable Professional,” or maybe the “P” more
accurately stands for an unflattering word.

Salim, through First Pacific and labyrinthine corporate layers, is the biggest single
stockholder with unchallenged control of what is called in this country as the “MVP Group of
Companies.”
The next biggest, but a poor second with much less shareholding of just 3 percent in First
Pacific is Sutanto Djuhar and his son Tedy, ranked 39th in 2010 in Forbes’ richest
billionaires list until 2010 with a net worth of $500 million.

Djuhar, 85, had been a close business partner of Anthoni’s father, who with two others,
established First Pacific in 1981 as a venue for bringing out of Indonesia some of the wealth
they generated as Suharto’s cukong — a term used in that era to mean Chinese
businessman providing funds for Indonesia’s military and political leaders in exchange for
patronage and protection.

“Yes, I was an antek, but I was not a bad one,” Soedono was quoted as saying in a recent
book, which was fawning over both Anthoni and Pangilinan, using the stronger Javanese
term for “crony” or “lackey.” During Suharto’s rule, the four were referred to in whispers in
Jakarta as the “Gang of Four,” being the strongman’s tight-circle of cronies during his
regime.

Or maybe Pangilinan’s shares have been deliberately concealed? But why would he,
especially since the foreign-owned conglomerate isn’t supposed to be in public utility firms,
if the Constitution is to be complied with?

But there is an obvious motive for portraying Salim’s conglomerate as the “MVP Group,”
and the person who thought of the scheme must be a PR genius. It veils the reality that a
foreign firm has come to dominate profitable public utility firms, even monopolies, which our
Constitution — even in its earlier versions — categorically prohibits. These series will
explain how Salim, with Pangilinan’s help, has managed that feat.

What kind of a country have we become?

Aquino will be giving away central Mindanao to the MILF, who will annex the area to a state
of Malaysia in a few years. He wants the US to acquire pockets of territory here the
Americans euphemistically will call “forward operating sites.” He has lost Bajo de Masinloc,
which has been ours since the Spanish times, to China, and everyone is furious at that
regional bully’s moves to claim everything in the West Philippine Sea.

Yet for more than 10 years now, we’ve given away strategic industries to … an Indonesian
billionaire?

NOTE

My requests for interviews or replies to e-mailed queries to Pangilinan and his officers,
made through his companies’ press officers, his closest friends, and even a former media
colleague now with him — the first of which was made several months ago — have all been
ignored. This series is based on research for a book I am working on, titled “Philippine
Hoaxes,” to include essays on the Bangsamoro, the Jabidah “Massacre,” DAP, and, of
course, the biggest, President Aquino.
Indonesian tycoon skirts Charter
limits through corporate layers
22
BY RIGOBERTO D. TIGLAO ON JUNE 9, 2015OPINION ON PAGE ONE

Second of a Series

Our Constitution is quite categorical: “No form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines, at least sixty per centum of whose capital is
owned by such citizens.”

So, how could Anthoni Salim — scion to the wealth of the late Indonesian strongman’s
biggest crony Liem Sioe Liong — be the controlling stockholder of the Philippines’ biggest
public utility firms that include such monopolies as Manila Electric Co., Philippine Long
Distance Telephone Co. (PLDT), Maynilad Water Services, and even the firm with the
longest toll roads? (For details, see the first part of this series “The Indonesian billionaires
behind the ‘MVP Group,’ June 2, 2016)

The answer is so illustrative of how weak a state we are, how our regulatory bodies are
captured by the elite, and how our laws can be easily skirted. On paper, and on so many
World Bank or Asian Development Bank reports, we appear to have the most restrictions on
foreign capital. In reality, our laws and regulations can be quite easily bent by clever,
expensive lawyers and our systems so porous they can easily be penetrated. We are, in
fact, the only country in Asia where the electric power and telecom industries are controlled
by foreign firms.

Salim’s Hong Kong-based investment firm itself, First Pacific, in its company report boasts it
has 55.8 percent beneficial ownership of the Metro Pacific Investments Corp. (MPIC), its
Philippine holding company, and a controlling 26 percent of PLDT. Salim — mostly through
shares he directly owns or through firms he owns entirely – holds 45 percent of First Pacific,
with the rest of the shares dispersed among thousands of international stock market
investors and fund managers.

Using First Pacific’s own figures — the accuracy of which is required under severe penalties
by Hong Kong’s Securities and Futures Commission — and including other foreign
investors, mostly through the stock market in the case of MPIC and a big 20 percent held by
Japanese firms in PLDT, foreign ownership in these two firms account for 86 percent and
77 percent, respectively, way above the 60 percent constitutional limit.

How can Salim get away with this?

Here’s how.

The Indonesian tycoon had set up a system of labyrinthine corporate layers that both veil
his control of the Philippine conglomerate and takes advantage of a loophole in our foreign
investment laws and regulations. What else could be the purpose of such layers, the notion
of which we first learned about only in 1986, when Marcos’ accounts in Swiss banks were
found hidden, as a government official put it at that time, “in layers upon layers of
companies”? Note how transparent firms such as the Japanese NTT and its subsidiary,
NTT DoCoMo, invested in PLDT with not a single intermediary firm.

Layers upon layers: What for?

Step 1. The first entity in the corporate layering labyrinth is a firm organized under
Philippine laws named Pilipinas Pacific Enterprise Holdings (PPEH). Salim’s First Pacific
Infrastructure Ltd. and the First Pacific Enterprise Holdings, B.V. hold 40 percent of it. The
other 60 percent is held by a firm whose ownership it did not disclose but which it claims is
“owned by a company organized under Philippine law that qualifies as a Philippine
national.”

We will reveal, though, in the next part of this series the surprising, even shocking
“stockholders” of this company.

Nevertheless, since 60 percent of the stockholders are “Filipinos”, Pilipinas Pacific

Enterprise Holdings is technically a Philippine firm under the Foreign Investments Act of
1991.

Step 2. Salim sets up a second corporate layer, with PPEH organizing a firm named
Enterprise Investment Holdings (EIH), in which it has 60 percent equity. Another Salim firm,
First Pacific International Ltd., holds the remaining 40 percent.

Voila! Since PPEH is legally classified as a Philippine firm, being 60 percent owned by
Filipinos, EIH is also classified as a Filipino corporation.

Grandfather rule

This is despite the fact that applying the SEC’s so-called grandfather rule, Salim’s control is
equivalent to 64 percent: a 40 percent direct holding by First Pacific International in EIH,
plus its indirect 24 percent through PPEH.

Step 3. Salim sets up a third corporate layer, with EIH owning 60 percent of Metro Pacific
Holdings. Salim’s three firms — First Pacific International Limited, First Pacific Telecom
Limited and Intalink B.V. — hold the remaining 40 percent.

Going by the SEC’s grandfather rule, though, and in terms of control and beneficial
ownership, Salim has 78.4 percent of Metro Pacific Holdings — with 40 percent directly held
by the three firms in this third-layer company, plus its effective 24 percent through EIH.

However Metro Pacific Holdings is classified, based on the Foreign Investments Law, as
“Filipino” since 60 percent of it is owned by a “Filipino” company EIH.

It is this firm that has the controlling 55.8 percent of Metro Pacific Investments Corp., which
operates nearly a dozen public utility firms, including such giant monopolies as PLDT,
Meralco and Maynilad Water Services.

Salim set up two other corporate layers for his control of PLDT, the Metro Pacific Resources
Corp. and Metro Pacific Asset Holdings, the latter being Salim’s corporate vehicle that in
1998 bought 60 percent of Philippine Telecommunications Investment Corp. (PTIC), which
is the biggest single stockholder of the giant telecom firm.

Salim bought it from the Antonio Cojuangco family in a curious case of the son of a crony of
an Indonesian strongman (Suharto) buying off the son of a crony of a Philippine strongman
(Marcos). In 2005, First Pacific bought the remaining 40 percent of PTIC that had
determined to be Marcos’ own shares.

The inanity of our purported restrictions on foreign capital is demonstrated by the fact that
Metro Pacific Asset Holdings, through the system of corporate layering is considered under
the Foreign Investments Act as a Philippine corporation, since a Philippine firm, Metro
Pacific Resources, which owns 60 percent of it, is a Filipino firm as a result of a devious
corporate layering scheme.

The reality, though, is that a foreigner, Salim, has effective beneficial ownership of 88
percent Metro Pacific Asset Holdings. It has 60 percent of PTIC, while the Hong Kong
based First Pacific itself holds the remaining 40 percent. With a further 4 percent in PLDT
through the New York stock market, Salim, through PLDT, has 26 percent of the company,
the biggest single controlling stockholder.

This isn’t just arithmetical magic, but the “reality” since dividends from PLDT and its three
dozen subsidiaries, from Meralco, and the other 40 firms of MPIC, will flow up the layers to
the ultimate beneficial owner — Salim.

From 2000 to 2014, in fact, First Pacific’s Philippine operations generated $2.7 billion —
$2.2 billion from PLDT — nearly double the $1.4 billion from its companies in Indonesia.
First Pacific had all but recovered the $749 million it paid to acquire control of PLDT in 1998
and 2005. It was PLDT funds and those from the stock market that financed First Pacific’s
acquisition of Meralco.

Meralco funds have even been used by Salim to set up a $1.2 billion megawatt plant in
Singapore. In August last year, PLDT bought for 333 million euros (P17 billion) a 10 percent
stake in German firm Rocket Internet.

Will that help enhance our internet speed here, from being the slowest in Asia? I doubt it.
PLDT’s own press release claimed that the investment would help finance Rocket’s “drive
for the development of online and mobile payment solutions in emerging markets.” PLDT —
and Salim with his 26 percent share of the profits—may make tons of euros from the
investment, but it won’t add to the capital invested in our telecom industry.

Decapitalization

There is a term for all these—decapitalization of the country.

And this column has still been getting comments why we are writing about foreign
dominance of public utility firms. Note that public utility firms mean a captive market.

In its reports to the US Securities and Exchange Commission, which has stringent
requirements of full disclosure of ownership of firms listed on the US stock markets, all
these seven investing firms mentioned and the two invested firms, PLDT and MPIC, are
represented only by a single person: First Pacific Chief Executive Officer, Manuel V.
Pangilinan. The name Anthoni Salim appears nowhere, although he is the ultimate, single
biggest stockholder of these firms.
But SEC has that “grandfather rule” to determine the extent of foreign capital doesn’t it?
Yes, but in a still another demonstration of how weak our regulatory systems are, the SEC
clarified that this grandfather rule (also called the “control test”)” applies only when the “60-
40 Filipino-foreign equity ownership is in doubt.”

And when will it be in doubt? When a case is filed at the SEC questioning that a company
has violated the constitutional limits on foreign control in companies involved in public utility
firms. Surprisingly, or to the credit of Salim’s main operative in the country, Manuel V.
Pangilinan, or another indication of the twilight of nationalism in our country, no such case
has been filed involving an Indonesian national’s control of Metro Pacific Investments.

That’s how useless our regulatory bodies are. There is a very high-profile firm operating the
biggest and most strategic public-utility firms in the country. Yet the SEC does absolutely
nothing to investigate if it is violating the Constitution.

However, one concerned citizen, the late Wilson Gamboa — an assemblyman in Marcos’
parliament — did file a case in 2007 protesting PLDT’s violation of the Constitution, since
even classifying PTIC as a Filipino firm, First Pacific’s direct shares, as well as the 20
percent holdings of two Japanese firms, plus those held by foreigners, had accounted for 80
percent of the company’s stock at that time.

After more than a decade, with such personalities as Dr. Bernardo Villegas defending
PLDT, the Supreme Court ruled in 2011 — with its decision reaffirmed in 2012 — that the
firm was, indeed, violating the constitutional limits on foreign investment.

Salim’s tremendous power over this country apparently has been demonstrated by the fact
that the Supreme Court’s ruling hasn’t been implemented three years later. (See my
columns: “PLDT mocks our Constitution,” March 26, 2014 and “How Salim skirted foreign
ownership limits,” March 3, 2014)

There could be a weak link, though, in Salim’s chain of corporate layers, designed to skirt
constitutional limits on foreign investment in public utility firms.

The corporate layers are based almost entirely on the claim that a Filipino firm, Pilipinas
Enterprise Management Corp., has 60 percent ownership of the first corporate layer,
Pilipinas Pacific Enterprise Holdings.

As I have explained, because this firm is purportedly Filipino, the other companies down the
system of corporate layers are alleged to be Filipino firms as well, through the 60-40 trick.

But is Pilipinas Enterprise Management Corp. really Filipino? If it is, the Salim conglomerate
has hidden billionaires. Or could the stockholders be merely stand-ins, err . . . dummies?

That in the next part of this series.

Closet billionaires . . . or corporate
dummies?
43

BY RIGOBERTO D. TIGLAO ON JUNE 6, 2016EDITORS' PICKS, OPINION ON PAGE ONE

[Published June 21, 2015]

Third of a Series

Part 1: The Indonesian billionaires behind the ‘MVP Group’

Part 2: Indonesian tycoon skirts Charter limits through corporate layers

Part 4: The smartest investors … or the most valuable puppets?

The Salim conglomerate in the Philippines, aka the “MVP” group, has five executives who
are the Indonesian billionaire Anthoni Salim’s Filipino partners, their identities heretofore
kept hidden from the public eye.

With the enormous income and share prices of the conglomerate’s subsidiaries, mainly
Philippine Long Distance Telephone Co. (PLDT), the mammoth holding firm, Metro Pacific
Investments Corp. and Meralco, these five executives could be the country’s closet
billionaires.

Or they could be merely corporate dummies who help portray the fiction that the
conglomerate is a Filipino entity, which, therefore, can go into public utility firms.

You decide what they are.

Except for the high-profile Manuel V. Pangilinan, 68 — who has been portrayed as
controlling, or even owning the conglomerate that is known by his name’s initials – you
mostly probably haven’t heard of them. Until now.

Surprisingly, these four executives are just third-tier executives in the hierarchy of the Salim
empire in the country:

 Alfredo Panlilio, 52, senior vice president for Customer Retail Services and Corporate
Communications of Manila Electric Co.
 Victorico Vargas, 62, president of Maynilad Water Services;
  Rene Bañez, 59, senior vice president, Supply Chain, Asset Protection and Management
Group of PLDT;
 Lourdes Rausa-Chan, 61, PLDT senior vice president for Corporate Affairs and Legal
Services, chief governance officer, and corporate secretary.

Indonesian tycoon Salim’s Filipino partners, and the market value of their indirectly held shares in
PLDT and Metro Pacific Investments Corp. – if they are really the owners of the key firms, that is.

Together with Pangilinan, they are the stockholders of a firm named Pacific Enterprise
Management Corp. (PEMH). Their respective percentage shares in the firm are shown in
Table 1.

This firm is the sole Filipino partner of Salim, through subsidiaries of First Pacific Co. Ltd.,
which he controls, in a shell company named Pilipinas Pacific Enterprise Holdings. This
company is at the apex of corporate layers that represent the investors in the Indonesian
billionaire’s Philippine empire.
 The Pangilinan-Panlilio-Vargas Group?

The company chairman is Pangilinan, who also chairs and is the sole representative of all
five intermediate firms that are the corporate layers for Salim’s control of PLDT and MPIC.
He is the biggest stockholder of the firm with a 29 percent stake.

Surprisingly, though – considering that Pangilinan has been the conglomerate’s public face,
and that many thought he was its controlling stockholder so that it was called the “MVP
Group” – the amount of shares of the next biggest stockholders, Panlilio and Vargas, aren’t
too far from his: 24 percent each. (Bañez and Rausa-Chan have 11 percent each.)

Also unexpected is that the PEMH president is a relatively young Panlilio, the youngest of
the group, but who is, in effect, Pangilinan’s right-hand man. Vargas is vice president, while
Bañez is treasurer. So if the group just had to have a Filipino name, instead of “Salim
Group,” perhaps more appropriate would have been “PPV Group,” after the initials of the
three biggest individual stockholders of the conglomerate, next to Salim.

However, Rausa-Chan isn’t the shell firm’s corporate secretary, the post she has occupied
in Salim’s flagship PLDT since the Indonesian tycoon acquired it in 1998. That post is held
by lawyer Alex Erlito Fider, a partner of the Picazo Buyco Tan Fider & Santos law firm. Fider
is also corporate secretary of five other firms belonging to the Salim conglomerate.
It is PEMH that allows Salim to skirt the constitutional ban on foreign controlled public-utility
enterprises.

That is undertaken by having this shell company own 60-percent of Pilipinas Pacific
Enterprise Holdings (PPEH), with the remaining 40 percent held by a subsidiary of First
Pacific Enterprise Holdings B.V., a Netherlands-based subsidiary of Salim’s Hong Kong-
based First Pacific Co., Ltd.

Since it is 60 percent owned by PEMH, whose stockholders are the five Filipinos, PPEH is
classified as a “Philippine corporation.”

The chain of corporate layers below PPEH – Enterprise Investment Holdings (EIH), Metro
Pacific Holdings, Inc., Metro Pacific Resources, Inc., and Metro Pacific Asset Holdings – are
all classified as Philippine firms, which, therefore, can own public utility firms. (See
accompanying chart.)

The reason why Salim had to have several corporate layers to invest in PLDT and MPIC,
even if PPEH is already masked as a Philippine corporation and, therefore, technically
allowed to control public utilities, is that each layer further dilutes the Filipino stockholders’
shares, and inversely increases his holding for near-absolute control.

Thus, while PPEH is 60 percent controlled by the five executives, its share is reduced to 36
percent in EIH, 21.6 percent in Metro Pacific Holdings (the corporate investor in Metro
Pacific), 13 percent in Metro Pacific Resources (one of the two investors in PLDT), and 8
percent in Metro Pacific Asset Holdings (the second investor in PLDT through Philippine
Telecommunications Investment Corp.)

On the other hand, Salim’s holdings inversely grow from 78 percent, 87 percent, to 92
percent, respectively, in the three firms for his uncontested control of these firms, even as
they are classified as “Philippine corporations,” thanks to PEMH’s role in the layers.

The all-Filipino firm PEMH’s economic interest in PLDT is reduced to 2.2 percent, and that
in MPIC to 12.1 percent. That of the Indonesian tycoon is 23.4 percent in PLDT and 43.7
percent in MPIC – if the Filipinos in PEMH actually own the shares registered to them, that
is.

Salim, with these shares, has an uncontested control of the two firms, since the remaining
shares are dispersed among thousands of investors in the stock market, though none of
them owns more than 1 percent.

And our stupid lawmakers, and even such purportedly professional organization of
economists such as the Foundation for Economic Freedom, are pushing for the lifting of the
country’s purported restrictions on foreign investments! What naiveté.

Biggest individual stockholders

The stockholders of PEMH make them the biggest individual stockholders of both PLDT
and Metro Pacific, because of their indirect holdings, as shown in Table 1.
TABLE 1: PEMH SHARE DISTRIBUTION AND INDIRECT SHARES IN PLDT AND MPIC,
THROUGH PEMH
(% OF TOTAL)

Source: The firms’ reports to US and Philippine SECs. (Percentages rounded off)

Their shares are much larger, for instance, than the second biggest individual stockholder
(after Pangilinan) in PLDT’s reports, Albert and Gretchen del Rosario, who together have
only 0.1 percent, according to the PLDT’s figures submitted to the US and Philippine SECs.

These percentage ownership figures certainly aren’t just of academic interest.

The billions of pesos of profits from PLDT and MPIC (especially from its very profitable
monopoly Meralco) are distributed to the ultimate owners, based on their direct and
indirectly owned shares, while the shares themselves are worth billions in the stock market.

Based on data reported by First Pacific in its annual reports from 2000-2014, that its share
of profits from PLDT totaled $2.2 billion, and from MMPIC, $378 million, the current stock
market prices of PLDT and MPIC, and indirect shares of the five Filipino executives, I
computed their income and market of value of shares they hold as shown in Table 2.

TABLE 2: ESTIMATED INCOME RECEIVED AND MARKET VALUE OF SHARES

INDIRECTLY OWNED BY THE FIVE EXECUTIVES
 (Percentages rounded off)

The figures are gargantuan, making them the country’s closet billionaires – if they are really
the stockholders, that is.

I doubt very much, though, if they really received these shares of profits, or else they would
have appeared since 2000 in the Bureau of Internal Revenue’s top taxpayers’ list. I’m also
astonished why they would still be working eight to 10 hours at Salim’s conglomerate, when
they could just rely on their share of even just PLDT and Meralco’s profits.

On Wednesday I will discuss who on earth are Panlilio, Vargas, Bañez, and Chan to Salim
that they became his partners. I will also discuss the obvious question: Are they really
billionaires with their indirect holdings in one of the country’s largest conglomerates, or are
they just dummies, their purported shares in reality held by Salim?

NOTE

I had sent emails, as far back as several weeks ago, to all the Salim group officials
mentioned in this article, requesting their comment on the points raised in this piece. I
wasn’t even given the courtesy of any form of reply. I had also informed certain people
close to Pangilinan and Panlilio that I had sent them such emails.

I am grateful to my colleague, columnist Emeterio Perez, for sharing with me crucial

information for this article.
The smartest investors … or the
most valuable puppets?
11

BY RIGOBERTO D. TIGLAO ON JUNE 23, 2015OPINION ON PAGE ONE

Fourth of a Series

I reported Monday the strangest thing about the Indonesian Salim-owned conglomerate in
the Philippines, aka the “MVP Group,” after the initials of Manuel V. Pangilinan, the group’s
top executive who many people had thought was its controlling stockholder: That is the
fact that a firm, heretofore kept from public eye, Pacific Enterprise Management Holdings
Inc. (PEMH), is the 60-40 partner of billionaire Anthoni Salim in a shell company, Enterprise
Investment Holdings.

This firm is the first of several corporate layers that create the legal fiction that Salim’s
investment vehicles in public utility firms – among them Philippine Long Distance Telephone
Co., Meralco, Maynilad Water Services and several others under his holding company
Metro Pacific Investment Corp. – are Philippine firms. (See “Closet billionaires or corporate
dummies ” June 22, 2015).

This is despite the fact that through the layering scheme, Salim’s effective ownership in the
investing firms increases to 78 to 92 percent in the companies that control public utilities
such as PLDT and Meralco, as well the holding firm, Metro Pacific Investment Corp.

That of the Filipino firm PEMH, on the other hand, is reduced to 21.6 percent in the
investing corporate vehicle in Metro Pacific Investments, and 13 percent and 8 percent,
respectively, in the two shell companies that hold the PLDT shares.

What is surprising is that instead of getting other Filipino tycoons – such as, for instance,
John Gokongwei, who had helped Salim in a Singapore deal and in disposing of Fort
Bonifacio; or the Ayalas, with whom he recently partnered for multi-billion infrastructure
projects – Salim chose as his partners, other than Pangilinan, third-tier executives from his
conglomerate, who don’t seem to be capitalists at all. If they are real owners of those
shares, that is.

Above, Anthoni Salim, who now controls strategic Philippine public utility firms such as PLDT and
Meralco, with his late father Soedono, the Indonesian strongman Suharto’s biggest crony. Below, a
rare photo of Anthoni’s biggest partners together, if their corporate reports are to be believed: left,
Victorico Vargas, Manuel V. Pangilinan and Alfred Panlilio. Lower photo from a philstar.com
article that identified the two as Pangilinan’s “sports brain trusts.”

Nearly as big as Pangilinan’s 29 percent holding in this firm are two equal stakes of 24.4
percent each held by Alfredo Panlilio, Meralco senior vice president for corporate
communications, and one Victorico Vargas, president of Maynilad Water Services. Panlilio
also happens to be president of the PEMH, which puts him in an awkward position, with his
boss at Meralco technically being just his employee.

The minority investors in PEMH who have 11.1 percent each are Rene Bañez and Ma.
Lourdes Rausa-Chan, ironically I would say, PLDT’s past and present chief governance
officers.

Why them?

Why did Salim or Pangilinan choose these particular people as Filipino partners in a key
corporate entity of the conglomerate’s ownership labyrinth?

Why not the group’s top executives since 1998, such as PLDT President Napoleon
Nazareno, Ray Espinosa, the conglomerate’s legal brains in charge of Salim’s media
empire and chair of the Philippine Star; Orlando Vea, who founded Smart, or even my old
colleague, Smart PR Ramon Isberto, whose loyalty to the conglomerate borders on the
religious.

Why not former Chief Justice Artemio Panganiban, who’s been a PLDT director ever since
he retired from the High Court and gives the Salim-controlled firm a sheen of constitutional
loyalty? Why not Foreign Affairs Secretary del Rosario, who had helped Pangilinan and
Salim get into the Philippine business world in the 1980s, and who had even been First
Pacific director for many years and resigned only when he was appointed to his current
post?

I won’t be too surprised if it turns out Bañez is, indeed, a stockholder of PEMH. He was
head of the Bureau of Internal Revenue in the administrations of both Fidel Ramos and
Gloria Macapagal-Arroyo, and until 2013 had been in charge of PLDT’s compliance with
government laws and regulations. Is he with PEMH for his vast government connections?

I don’t wonder, though, why Rausa-Chan is a stockholder of PEMH, if she really is, that is.
Since 1998 when Salim acquired the firm, she has been PLDT’s corporate secretary. In the
Philippines, that is one of the most powerful corporate positions given its private, direct
knowledge of all of a company’s secrets.

However, I can’t figure out why Panlilio and this Vargas should be the biggest stockholders,
after Pangilinan, of PEMH, if that is really true. I hope readers of this column can enlighten
me on this matter.

Both are known to be the athletic type, and are Pangilinan’s representatives in the
Philippine sports world. The conglomerate has the country’s biggest patron of sports, a very
clever move that has boosted Pangilinan’s prestige. No other tycoon has been as involved
as a patron of sports as Pangilinan has been.

Sports writers refer to Panlilio and Vargas as Pangilinan’s “sports brain trusts.” They are the
top officials of the MVP Sports Foundation, the Samahang Basketbol ng Pilipinas, and the
Philippine Basketball Association (PBA). Panlilio is also treasurer of the National Golf
Association, while Vargas is president of the Amateur Boxing Association of the Philippines
and a member of the Philippine Olympic Commission, as well as the International
Basketball Federation.

I don’t see, though, how involvement in sports enterprises could be a criterion for Salim’s
choice of partners for his conglomerate.

I had been hoping that Pangilinan and his colleagues would respond to my column on
Monday, June 22, with a logical explanation as to why they aren’t really merely dummies of
the Indonesian tycoon, and that they really own the shares in PEMH as reported in their
filings with the Securities and Exchange Commission. If they, indeed, own the shares, they
would be multi-billionaires and the country’s smartest investors ever.

Not a word, though, from them nor any of their representatives, especially from their
corporate secretary, Alex Erlito Fider, who swore “under the penalty of perjury” that the
General Information Sheet he submitted to the SEC, which lists the five as the firm’s
stockholders, is “true and correct.”

Instead, a reader alerted me to the act that the filings of Salim’s Hong Kong-based First
Pacific Co. Ltd. to regulatory bodies in the region and in the US report that its economic
interest in PLDT totals 25.6 percent and in Metro Pacific Investments, 55.8 percent. Hong
Kong regulatory bodies strictly require accurate reports of ownership of a listed firm as First
Pacific Co. Ltd.

But such equity holdings are on the assumption that PEMH is owned, not by the five Filipino
stockholders, but by First Pacific. In that case, it would mean the Filipinos are merely
dummies.

If PEMH is what it claims to be, as owned by the five Filipinos, First Pacific would report its
economic interests in PLDT to amount to only 23.4 percent (and not 25.6 percent), with the
Filipino PEMH holding 2.2 percent.

In the case of MPIC, it would, instead, report that its equity interest was equivalent to 43.7
percent – not 55.8 percent – with the Filipino entity PEMH owning a 12.1 percent stake.

DISCREPANCIES IN FIRST PACIFIC’S REPORTS?

(IN PERCENT)
 I’m sure
PEMH stockholders can explain that they haven’t really violated that old Anti-Dummy Law of
1936 (amended by Presidential Decree No.715), the monetary penalties for which are
certainly small, but involve up to 15 years of imprisonment.

I can’t wait to hear their explanation.

It would also be helpful, if they want to prove that they are the real stockholders of PEMH,
for them and for the corporate secretary to show us copies of their receipt of billions of
pesos in dividends from such firms as PLDT and Meralco, being the companies’ indirect
investors who should be receiving their share of profits.

On the other hand, if they aren’t really the stockholders of PEMH, they would be people
actually representing another entity, or under the control of another entity, which is the
definition of a “puppet.”

Unless they can prove otherwise, they would be Salim’s MVPs, his Most Valuable Puppets.

SC decision deals devastating blow

to economic nationalism
16

BY RIGOBERTO D. TIGLAO ON JANUARY 18, 2017OPINION ON PAGE ONE

 THE Supreme Court in a decision last November 22, by a vote of eight to five, dealt a
devastating blow to the nation’s policy of economic nationalism that had been enshrined in
the 1987 Constitution.

This decision involves the case filed in 2007 alleging that the Philippine Long Distance
Telephone Co. (PLDT) had violated the constitutional provision limiting foreign ownership of
public utility firms to 40 percent.

The high court ruled in 2011 and 2012, that PLDT did breach the 40 percent limit, and
ordered the Securities and Exchange Commission (SEC) to issue the rules that would
implement its decision.

The SEC, however, issued rules in 2013 which patently didn’t implement the Supreme
Court’s decision, and allowed PLDT to maintain foreign companies’ control of it. A petition
was filed by lawyer Jose Roy and others that year asking the Court to declare the SEC’s
rules as not complying with the Court’s decision, and to order it to issue new guidelines

Surprisingly, the recent November 22 Court decision struck down the Roy petition, simply
ruling that the SEC rules were “not contrary to the Court’s decision” – when any rational
person reading the regulatory body’s guidelines would conclude without a doubt that these
were crafted to skirt the tribunal’s ruling.

It is certainly a victory for Indonesian tycoon Anthoni Salim, a crony of the late strongman
Suharto and the biggest and controlling stockholder of PLDT since 1998. With his control of
the mammoth PLDT since 1998. With his control of the mammoth PLDT since the
administration of President Estrada who helped him capture the firm, and using the firm’s
financial resources to a significant extent, Salim has been successful in building the
country’s biggest public-utility-based conglomerate that operates the electricity-monopoly
Meralco, the water-distribution firm Maynilad, and the country’s largest toll-road operator.
Such is the sorry state of our nation.

The gist of the Court’s decision is that it amazingly saw nothing wrong in PLDT’s use since
2004 of a corporate artifice it invented to claim that it is just 32 percent owned by foreigners,
even if these foreigners officially hold 54 percent of its capital, 74 percent if American
Depositary Shares (ADS) traded at the New York stock exchange are included in the
counting.

Indeed, even Salim’s First Pacific Co. Ltd. has been declaring in its annual reports and in its
website that its economic interest in PLDT is 26 percent. With the Japanese NTT group’s 20
percent holdings, as declared also in its reports, the ownership of PLDT by these two
foreign entities is already, at 46 percent, past the Constitution’s 40 percent limit. These are
based on the definition of corporate matters by every country in this planet that ownership
percentages are computed based on common stocks.

74 percent foreign
PLDT’s annual reports to the US Securities and Exchange Commission also show that
foreign entities altogether own 74 percent of the telecom firm. (Twenty percent of the 74
percent are in the form of ADS, which are technically still Filipino-owned, but with all income
from these going to the American holder of these instruments.)

This artifice—which is so absurd it defies common sense—is the cheap 150 million “voting
preferred stocks,” worth P150 million, which PLDT issued after the 2011 Court decision.
PLDT sold these shares to only one entity, the employees’ pension fund that it controls
called the Beneficial Trust Fund, in order to create the fiction that it is majority-owned by
Filipinos. Its par value of P1 has remained unchanged since it cannot be sold without
PLDT’s consent, much less traded in the stockmarket.

The value of these voting preferred shares, P150 million, is a fraction of the value of PLDT’s
216 million common shares. The par value (when it was first sold) of these common shares
was worth P1.1 billion. At market prices, using its average last year of P2,000, these are
worth a gargantuan P432 billion.

Foreigners own 54 percent of these common shares, way past the 40 percent limit
stipulated by the Constitution, while Filipinos own 46 percent.

Yet the Court capitulated to PLDT and Salim lawyers’ claim that the firm is only 32 percent
owned by foreigners, in compliance with the Constitution’s provisions. How can they make
such a preposterous claim in the face of hard numbers?

By arguing that the computation should be based on the total number − the sum − of both
common and voting preferred shares, and to disregard their values.

In this deception, PLDT’s Beneficial Trust Fund’s 150 million voting preferred stocks is
already 41 percent of the sum of PLDT’s 216 common and 150 million voting preferred
shares, or 366 million. Filipinos’ holdings of another 99 million common shares puts its total
ownership at 249 million shares, or 68 percent, while those of foreigners are portrayed to be
only 32 percent.

The trick here, which the Court pretended not to see, is that cheap voting preferred shares
were precisely issued in order to dilute the number of foreigners’ ownership so that PLDT
would appear to comply with the constitutional limits. (see chart below)

PLDT’s claim is patently absurd, yet the Court—or eight of the 13 voting justice—accepted
it. Senior Justice Antonio Carpio in his dissenting opinion lucidly tore down the veil of
deception:

“If the shares of stock have different par values, such a simple application will result in an
absurdity or anomaly…It is hornbook doctrine that if a provision of the Constitution or the
law is susceptible of more than one meaning, one resulting in an absurdity or anomaly and
the other in a sensible meaning, the meaning that results in an absurdity or anomaly must
be avoided, particularly an absurdity or anomaly that frustrates the intent of the Constitution
or the law. Thus, to avoid such an absurdity or anomaly, the 60 percent Filipino ownership
requirement should be applied to each class of shares if their par values are different.”
(Emphasis supplied)

Beneficial Trust Fund

That PLDT made a fool of the Court is obvious in that it didn’t even discuss the fact that the
sole owner of these “voting preferred stocks” is PLDT’s Beneficial Trust Fund. This is an
entity effectively controlled through the firm’s management, under the control of the
Indonesian tycoon Salim and his biggest foreign partner in the firm, the giant NTT group of
Japan. In the absurdity of PLDT’s explanation of its ownership structure, it is its pension
fund that is its single biggest stockholder, with its “41 percent stocks” more than half of
Salim’s 26 percent.

It was actually Globe Telecom, the other member of the telecom duopoly, that first used—in
2001 when it bought Isla Communications that had a huge investment from the German
Deutche Telekom—the voting-preferred-stocks artifice to skirt the constitutional ban on
foreign control of a public utility.*

In Globe’s case, the cheap 159 million “voting preferred shares” that portrayed it as
complying with the constitutional limits were issued to, and to this day held by, one shell
company the firm itself set up, Asiacom, a joint venture between Ayala Corp. and Singtel.
The latter is the Singaporean state-owned telecom giant that owns 47 percent of Globe’s
common shares, more than the 40 percent limit under the Constitution. (Ayala strangely—
as it has the money to increase its shares—only has 30 percent.)

One indication that something’s very wrong with the Court’s decision is that it was the most
junior member, Alfredo Caguioa who was the college buddy of President Aquino who
appointed him, who wrote the decision which favored Salim and reversed the Court’s earlier
decision made in 2011 and 2012, both written by its most senior justice, Carpio.

These figures on ownership aren’t abstract ones, as these have an impact on the economy,
and therefore on ordinary peoples’ lives. Because of foreigners’ ownership of 74 percent of
the stocks of PLDT that exploits natural resources (the radio spectrum), our huge market,
and its duopolistic powers, they have managed to take out of the country as profits since
2000 a mammoth $7 billion.

What does that figure mean? That’s roughly equivalent to the amount of foreign investments
that has been coming into the country in the same period, which means PLDT’s foreign
ownership structure is decapitalizing our economy.*

What a country. A crucial provision of the fundamental law of the land called the
Constitution, essential to our economy’s growth and even the nation’s security, is subverted
through corporate artifices, and ruled legal through convoluted and absurd legal arguments.

However, the Supreme Court decision on PLDT is really so convoluted—because it

required such absurd contortions of logic—that there is actually hope that the nation, or
specifically this administration, can still uphold our Constitution. That is for Friday’s column.

*Note: Details of these points are in my book, Colossal Deception: How Foreigners Control
Our Telecom Sector, available at National, Popular, and La Solidaridad book stores.

E-mail: tiglao.manilatimes@gmail.com
FB: Bobi Tiglao and Rigoberto Tiglao